On the formatting front, Wikipedia has an exhaustive comparison of eBook formats. An author usually starts with a .txt, .doc or .pdf file which must be converted to a format an eBook reader understands. Those are:

Two important notes about format. First, format is tied to software reader, not hardware platform. For instance, the Kindle reader runs on iPads and Androids as well as the Kindle.

Second, just because a format is supported, doesn't mean it's easy reading. PDF files are supported on most readers, but the display isn't great on small screens and reader functionality like page turning may not integrate well with PDF files. For the best reader experience, convert to the software reader's preferred format.

An author has three basic options:

Find conversion software that converts to each of the target file types.

Hire a professional to perform the conversion (rates currently seem to run about $150 for a book under 400 pages with no graphics or footnotes to convert).

Economically speaking, the more DIY, the larger the author royalty per sale.

A self-publishing author probably shouldn't use the same cover art for an eBook as a printed book. Since eBooks are listed as thumbnails in online catalogs, the graphics have to work on a different scale. Browse a few online stores to get a sense for what kinds of graphics work. Most DIY format conversion programs and services will require the author to provide the eBook cover art.

Besides formatting, the other decision for authors is distribution. Authors again have three basic choices:

Submit the proper file format to each online store. Not all stores accept files from individual authors. Stores that accept files are Amazon Digital Text Platform (DTP), Barnes & Noble pubit, and Scribd. Scribd is a special case, most useful today for publishing free excerpts, but also a bone fide store.

Find an aggregator that submits eBooks to online bookstores and keeps a part of the royalty. Popular aggregators today are lulu, smashwords, and fastpencil.

Find a publisher that manages the entire eBook publishing process.

Aggregators offer many services a traditional publisher offers (formatting, cover art, proof-reading), but for a fee. Aggregators pay larger royalties than traditional publishers and, for the most part, allow the author to set the price. This last point is very important as the eBook market evolves.

Authors who want print-on-demand (POD) versions of their books probably want to work with an aggregator since most aggregators provide this. Aggregators also sell eBooks in their own online stores, of course, but those stores don't appear to produce high unit volume sales yet.

The aggregator side of publishing is the hardest to decipher for an author. The CNET article does a good job of explaining both the upfront fees and the downstream splits between the online stores, the aggregators, and the author. But rates are changing, and throwing POD books in the mix complicates the decision process further. Since the rates today are reasonably competitive, a good rule-of-thumb is to use an aggregator that has easy-to-use online services.

More successful self-publishing authors should consider higher-end services like Ingram Digital that target publishers rather than authors.